As organizations face an onslaught of fast-moving, high-impact technological advances — artificial intelligence and blockchain, to name two — it falls to finance  leaders to lay the groundwork for their companies’ transformations to fully digitized business models.

A recent survey conducted by CFO Research, in collaboration with Tata Consultancy Services (TCS), sought to measure to what extent finance executives have begun to prepare their organizations for a new era that TCS calls “Business 4.0.”

The online questionnaire from CFO and TCS drew 689 responses from senior finance executives in the United States and Europe. The majority of respondents, representing a variety of industries, held the titles director of finance, CFO, CEO, president, and managing director.

As digitization spreads throughout the economy, the most successful CFOs will be those who consistently figure out how best to integrate the new technologies to deliver added value.

The path to Business 4.0 requires finance leaders to make strategically selective investments, balancing leading-edge technologies with those that are sufficiently dependable to produce visible improvements in operational and financial performance.

futuristIn addition to technological issues, there are also managerial challenges associated with continuously enhancing digital capabilities. They include effectively allocating people resources; recruiting and incentivizing the necessary talent; and aligning functions such as marketing and product development.

Laying the Foundation

For starters, finance chiefs need to evaluate their companies’ capabilities, zeroing in on six specific areas that constitute the core of any digital strategy: analytics and measurement; agility and efficiency; business architecture; governance, risk management, and compliance: shared services/business process outsourcing; and organizational alignment.

In the survey, respondents most frequently ranked their finance functions’ digital capabilities in the six areas as “moderate.” For example, 37.5% said their organization’s business architecture was neither ad hoc (a score of 1) nor completely streamlined and integrated (a score of 5), but somewhere in the middle of those two.

“Analytics and measurement” and “agility and efficiency” were slightly less frequently graded as “moderate” and drew more respondents to the lower end of the scale.

On the other end, “governance, risk management, and compliance” most frequently ranked high, with 29.5% of respondents giving GRC at their companies a 5, meaning it is “well controlled.” (See Figure 1, above.)

The relatively lackluster scores in some areas could suggest complacency. But having watched digital “disruption” turn many an industry upside down, respondents were clearly aware that a wait-and-see approach is not an option.

As evidence, 56% of respondents that ranked their organizations in the lower tiers of agility and efficiency plan to move to a higher tier, becoming more customer-centric and cost-optimized, in the next 12 to 18 months.

Transformation Imperative

The senior finance executive must serve as catalyst, shaping a company-wide environment that engenders and supports real-time decision-making and collaboration.

For finance to draw a realistic plan for achieving such goals, it needs to assess how digitally astute the company is — including evaluating finance’s own capacity, and potential, for providing leadership in such a dynamic situation.

Now, with technologies like artificial intelligence and robotic process automation (RPA) arriving on the market, digitization can also be applied to processes. In the survey, senior finance executives rated their organization’s performance in four different areas of digital competency.

The four areas, vital to creating a business that supports growth in a digitized organization, are:

  • Digital enablers — technology-based architectures, platforms, apps, and interfaces required to build and achieve digital goals
  • Digital strategy — defined and measurable vision, goals, and objectives in place to drive digital business outcomes for the short and long term
  • Digital leadership — accountability for, and ownership of, those goals, objectives, and vision
  • Business structures, ecosystems, and culture — the business, operating, organizational, and capability models supporting execution and sustainability of the digital strategy

A good number of executives that took the survey assigned a 1, defined as “cautious follower,” to their companies for the digital enablers category. (See Figure 2. above.) That suggests these companies have yet to master the implementation of real-time, available, and integrated solutions or to enable multi- or omni-channel distribution.

A majority of respondents who ranked their companies highly —  them a 4 or 5 (“industry leader”) across the four dimensions of digital competency — shared a common goal. More than three-quarters, 77%, planned to increase their total spending on digital transformation initiatives by at least 5% in their next annual budget. (Only 59% of the total survey population planned to do the same.)

That high percentage (77%) suggests that investing in digital technology is the best argument for continuing to invest in it. Respondents that have successfully embarked on transforming their businesses digitally feel validated in continuing to follow that path.

Clearly, senior finance executives understand that adopting Business 4.0 and making the digital shift is essential to growing their organizations. The drive toward digital transformation is reshaping their work along with everyone else’s. CFOs must juggle the twin challenges of keeping the existing business growing and leading its reinvention.

Can they possibly do it all? An overwhelming majority of respondents to the survey, 86%, insisted that their finance function can effectively engage on digital topics, sponsor digital initiatives, and move the organization to the desired level of digital competency. The CFO’s part in the digital transformation represents the culmination of the role’s ongoing overhaul. Time will tell if finance chiefs are really up to the task.

Image: Getty

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